California Promissory Estoppel Law Elements & Defenses

Definition

In California, under the doctrine of promissory estoppel, “[a] promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires. (Kajima/Ray Wilson v. Los Angeles Cnty. Metro. Transp. Auth. (2000) 23 Cal.4th 305 quoting Rest.2d Contracts, § 90, subd. (1).)

Promissory estoppel is a doctrine which employs equitable principles to satisfy the requirement that consideration must be given in exchange for the promise sought to be enforced. Because promissory estoppel is an equitable doctrine to allow enforcement of a promise that would otherwise be unenforceable, courts are given wide discretion in its application. (Barroso v. Ocwen Loan Servicing, LLC (2012) 208 Cal.App.4th 1001; US Ecology, Inc. v. State of California (2005) 129 Cal.App.4th 887, 901–902.)

Rule

The elements of a promissory estoppel claim are “(1) a promise clear and unambiguous in its terms; (2) reliance by the party to whom the promise is made; (3) [the] reliance must be both reasonable and foreseeable; and (4) the party asserting the estoppel must be injured by his reliance.” (US Ecology, Inc. v. State of California (2005) 129 Cal.App.4th 887, 901; Joffe v. City of Huntington Park (2011) 201 Cal.App.4th 492, 513; see also Aceves v. U.S. Bank N.A. (2011) 192 Cal.App.4th 218, 225.)

Element 1: Clear and Unambiguous Promise

The first element in a complaint for promissory estoppel is a promise that is clear and unambiguous in its terms. (US Ecology, Inc. v. State of California (2005) 129 Cal.App.4th 887, 901; Lange v. TIG Ins. Co. (1998) 68 Cal.App.4th 1179, 1185.)

Promissory estoppel cannot be invoked to enforce preliminary negotiations or discussions between the parties because no clear and unambiguous promise has been made. (Aceves v. U.S. Bank N.A. (2011) 192 Cal.App.4th 218, 225.)

Where a full commitment between the parties is missing and the offeree is on notice that finalization of the terms will require further negotiations, there is no clear and unambiguous promise by the offeror. (Laks v. Coast Fed. Sav. & Loan Ass’n (1976) 60 Cal.App.3d 885, 891 [conditional commitment letter for construction financing did not create clear and unambiguous promise].)

A general contractor’s listing of subcontractors combined with a statutory restriction on the right to change listed subcontractors did not constitute a clear and unambiguous promise to accept a listed subcontractor’s bid. (Southern Cal. Acoustics Co. v. C.V. Holder, Inc. (1969) 71 Cal.2d 719, 723.)

A representation in job application instructions that industry experience would be “considered” did not constitute a clear and unambiguous promise that previous longshore experience would be the determinative factor in who was registered for full-time permanent longshore work. (Aguilar v. International Longshore-men’s Union Local 10 (9th Cir. 1992) 966 F.2d 443, 446.)

Element 2: Actual Reliance

The promisee must have actually relied on the promise. (Property California SCJLW One Corp. v. Leamy (2018) 25 Cal.App.5th 1155.)

A law student’s hard work to obtain a top ten percent ranking in his law school class, performed in reliance upon the law school’s representation that such ranking would make him eligible for election to the Order of the Coif, was not action of a definite and substantial character necessary for the application of promissory estoppel. (Blatt v. University of S. Cal. (1970) 5 Cal.App.3d 935, 944.)

In matters of employment relationships, courts may make reasonable inferences from the realities of the marketplace concerning the inducement and reliance of employees upon the benefits offered by the employer. Employees need not expressly testify that, but for the promise, they would have left the promisor’s employ or would have never worked there in the first place. (Department of Indus. Relations v. Transpacific Transp. Co. (1979) 88 Cal.App.3d 823, 831 [involved claims of both promissory estoppel and estoppel by conduct].)

Although a wage increase set forth in a Memorandum of Agreement approved by the union membership may have constituted a clear and ambiguous promise, the breach of which may have caused injury to plaintiffs, this did not establish that the injury was a result of reliance upon such memorandum. (Thompson v. International Alliance of Theatrical Stage Employees and Moving Picture Mach. Operators (1965) 232 Cal.App.2d 446, 454 [promissory estoppel was not applicable].)

Element 3:  Reasonable and Foreseeable Reliance

The promisee’s reliance on the promise must be both reasonable and foreseeable. (Aceves v. U.S. Bank N.A. (2011) 192 Cal.App.4th 218, 225.)

Reasonable reliance binds the promisor in lieu of the consideration ordinarily required to make the offer binding. (Drennan v. Star Paving Co. (1958) 51 Cal.2d 409, 414 [where promisor had reason to both expect and want promisee to rely on its bid for paving work, reliance was both reasonable and foreseeable].)

The element of reasonable and foreseeable reliance is satisfied if the promisor, in making the promise, deliberately intended to induce the plaintiff’s reliance on such promise. (West v. Hunt Foods, Inc. (1951)101 Cal.App.2d 597, 605 [employer’s promises of retirement benefits made with intent to induce employee to remain with company were enforceable under promissory estoppel doctrine].)

An employer’s assurances of future financial security for employee, which were deliberately intended to induce employee to forego other offers of employment, were enforceable under promissory estoppel doctrine. (Van Hook v. Southern Cal. Waiters Alliance, Local 17 (1958) 158 Cal.App.2d 556, 570.)

Element 4: Injury (Detrimental Reliance)

The party asserting the estoppel must be injured by his reliance on the promise. (Aceves v. U.S. Bank N.A. (2011) 192 Cal.App.4th 218, 225.)

The purpose of the promissory estoppel doctrine is to make a promise by one party and the resulting detrimental reliance by another party operate as a substitute for consideration under certain circumstances. (Garcia v. World Savings, FSB (2010) 183 Cal.App.4th 1031.)

A law student who relied on the law school’s statements regarding eligibility for admission to an honors society suffered no detriment when the society refused him admission, because membership in the society had no bearing on the number or type of clients an attorney might have or on an attorney’s income from his professional practice. (Blatt v. University of S. Cal. (1970) 5 Cal.App.3d 935, 942.)

The value of the plaintiff’s detrimental reliance need not be identical with, or equated to, the value of the defendant’s promise. (Aceves v. U.S. Bank N.A. (2011) 192 Cal.App.4th 218, 225.)

Injustice Can Be Avoided Only By Enforcement of the Promise

The plaintiff must show that injustice can be avoided only by enforcement of the promise. (DeVoll v. Burdick Painting (9th Cir. 1994) 35 F.3d 408, 412 n.4.)

An oral promise that meets the elements of promissory estoppel is enforceable if injustice can be avoided only by enforcement of the promise. (Rest.2d Contracts, § 139.)

The meaning of “injustice can be avoided only by enforcement of the promise” is substantively the same thing as the requirement of unjust enrichment or unconscionable injury. (Munoz v. Kaiser Steel Corp. (1984) 156 Cal.App.3d 965, 974.)

Unconscionable injury results from denying enforcement of an oral agreement after one party is induced by another party to seriously change position relying upon the agreement. (Siam Numhong Prods. Co. v. Eastimpex (N.D. Cal. 1994) 866 F. Supp. 445, 448; Rest.2d Contracts, § 139.)

Remedies

Enforcement of the Promise

Insurer under personal liability policy was liable for judgment against its insured where insurer made commitment to be liable under insurance policy for amount of judgment. (Tomerlin v. Canadian Indem. Co. (1964) 61 Cal.2d 638, 649.)

Compensatory Damages

Promisee’s recoverable damages in promissory estoppel might well be limited to those he sustained directly from his justifiable reliance upon the promise. (Swinerton & Walberg Co. v. City of Inglewood – Los Angeles County Civic Ctr. Auth. (1974) 40 Cal.App.3d 98, 105, 114.)

Lost Profits

Reasonably anticipated lost profits can be considered in determining damages in promissory estoppel actions. (Walker v. KFC Corp. (S.D. Cal. 1981) 515 F. Supp. 612, 617.)

No Right to Jury Trial

No right to jury trial in action based solely on promissory estoppel. (C&K Engineering Contractors v. Amber Steel Co. (1978) 23 Cal.3d 1, 11.)

Statute of Limitations

Generally, the limitations period is four years for written contracts (Cal. Civ. Proc. Code, §337, subd. (a)), and two years for oral agreements. (Cal. Civ. Proc. Code, §339, subd. (1)). A contract cause of action does not accrue until the contract has been breached. (Spear v. Cal. State Automobile Assn. (1992) 2 Cal.4th 1035, 1042.) The discovery rule may be applied to breaches of contract which can be, and are, committed in secret and, moreover, where the harm flowing from those breaches will not be reasonably discoverable by plaintiffs until a future time. (Gryczman v. 4550 Pico Partners, Ltd. (2003) 107 Cal.App.4th 1, 4-5.)

If delay in commencing an action is induced by the promisor’s conduct, the promisor is estopped from asserting the defense of the statute of limitations. The plaintiff has a reasonable time in which to bring his action after the estoppel has expired. (Van Hook v. Southern Cal. Waiters Alliance, Local 17 (1958) 158 Cal.App.2d 556, 568-69 [union was estopped to assert statute of limitations defense where union required plaintiff to exhaust internal remedies of appeal within union before filing suit].)

Affirmative Defenses

Plaintiff’s Performance Was Bargained-For

Promissory estoppel doctrine did not apply when employee relied on promise of annual merit step increases in salary in accepting employment, continuing in that job and refraining from accepting a job elsewhere. (Youngman v. Nevada Irrigation Dist. (1969) 70 Cal.2d 240, 249.) Subcontractor who continued to excavate unexpected cemented soil in response to general contractor’s promise that he would be compensated for the extra work gave bargained-for performance. (Healy v. Brewster (1963) 59 Cal.2d 455, 463; see also Walker v. KFC Corp. (S.D. Cal. 1981) 515 F. Supp. 612, 616 [existence of contract which contained bargained-for promise did not preclude recovery under promissory estoppel doctrine based on promises that were not part of the contract].)